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MARIN COUNTY BOARD OF REALTORS INC v. PALSSON (1975)

Court of Appeal, First District, Division 2, California.

MARIN COUNTY BOARD OF REALTORS, INC., Plaintiff, Cross-Defendant and Respondent, v. Eugene PALSSON, Defendant, Cross-Complainant and Appellant.

Civ. 34477.

Decided: August 21, 1975

Harold L. Howard, Quantz & Howard, San Francisco, for Eugene palsson. Evelle J. Younger, Atty. Gen. of Cal., Anthony C. Joseph, Asst. Atty. Gen., Michael I. Spiegel, William S. Clark, Deputy Attys. Gen., San Francisco, for amicus curiae State of Cal. Bagley, Bianchi, Hoskins & Rosenberg, Albert Bianchi, Hugh J. Cadden, San Rafael, for Marin County Bd. of Realtors, Inc.

The appeal at bench involves an antitrust suit brought by appellant Eugene Palsson, a part-time real estate salesman, against respondent Marin County Board of Realtors, Inc. (‘MCBOR’). The background facts may be stated as follows:

MCBOR is an incorporated local real estate association formed to sell residential properties in Marin County, California. It owns and controls the only multiple listing service1 in county for the sale of residential properties. Pursuant to the ‘Constitution and By-Laws' (‘By-Laws') the multiple listing service is limited to the exclusive use of MCBOR membership comprised primarily of active (broker) and associate (salesman) members. Thus, the By-Laws explicitly provide that ‘No member shall list, directly or indirectly, any Multiple Listing Service listed property with anyone not a member of this Corporation,’ and that ‘Listings are for the exclusive use of only the Active and Associate members of the Marin County Board of Realtors. Members are prohibited from disseminating or distributing published listings to the general public.’ The By-Laws prohibit an active member from sharing offices with anyone who is not an active member. At the same time the By-Laws require that a salesman apply for associate membership within 60 days of his employment by an active member. If such application is not made within the prescribed 60 days, or it made and the applicant found not eligible, the broker must terminate the employment of the salesman. The broker is likewise under a duty of not employing anyone who has been denied membership in, or is suspended or has been expelled from, the association. The evidence presented at the trial indicates that the restrictive provisions of the By-Laws have been dutifully carried out and enforced by the MCBOR members.

According to the By-Laws, associate membership in MCBOR is available only to individuals who (1) possess a real estate salesman's or broker's license from the State of California; (2) are employed by an active member (i. e., a licensed broker); and (3) meet also the other entry requirements of the Board. These requirements are, inter alia, that the salesperson be primarily engaged in the real estate business and possess personal repute for fair and ethical conduct and integrity.2

Even a cursory reading of the statistical data introduced in evidence discloses that MCBOR played a very significant role in selling residential properties in the county. As had been shown and found by the trial court, 75 percent of real estate brokers actively engaged in the sale of residential property in Marin County were members of MCBOR, and MCBOR had 255 active members (brokers) and 777 associate members (salesmen) as of February 1, 1973. The number of listings on the Marin County Multiple Listings totaled 27,863 during the five years covering 1968–1972. For the same period of time the multiple listing service of MCBOR accounted for more than 12,000 completed sales, exceeding 450 million dollars in sales price. The multiple listings sales in 1972 alone totaled $131,222,396. The evidence introduced at trial similarly revealed that MCBOR was engaged in heavy promotional advertising on behalf of its members and the multiple listing service. These advertisements repeatedly underlined that listing on the multiple listing service would result on greater market exposure and that the listing information would reach over 1,000 sales people.3

Appellant, who was a senior flight engineer for Trans World Airlines, acquired a real estate salesman license from the State of California on December 29, 1969. On January 13, 1970, he was hired as a salesman by T. B. McGuire Real Estate of California, Inc. (‘McGuire’), an active (broker) member of MCBOR. In order to comply with the provisions of the By-Laws and to avail himself of the advantages of the multiple listing service, on March 12, 1970 appellant applied for associate membership in MCBOR. On April 9, 1970, his application was denied by the Board of Directors on the ground that he was ‘no primarily engaged in the real estate business' as required by article I, section 3, of the By-Laws.

Seeking a resolution of the controversy precipitated by the denial of membership, MCBOR filed a complaint seeking a declaration that article I, section 3, of the By-Laws was valid and that it was lawfully applied to appellant. Thereafter appellant filed an answer and cress-complaint, alleging inter alia that article I, section 3, violated the antitrust laws of California by unreasonably restricting the practice of the real estate business in Marin County; that the denial of his membership amounted to wrongful interference with his employment relationship; and that respondent acted maliciously and in a discriminatory manner against him. Appellant sought declaratory and injunctive relief in addition to general and punitive damages.

The trial court, sitting without a jury, found that appellant was not primarily engaged in the real estate business; that article I, section 3, of the By-Laws was reasonable and a proper exercise of respondent's corporate powers and that it was applied fairly and without discrimination to appellant. In harmony with its findings, the trial court concluded that the respondent's operations and activities concerning the multiple listing service were designed to increase the quality of real estate service and did not violate any antitrust legislation. Consequently, the trial court rendered judgment in favor of respondent and dismissed appellant's cross-complaint.

On appeal, appellant, buttressed by the Attorney General as amicus curiae, primarily contends that in view of the fact that respondent controls the only multiple listing service in the county, the requirement that a real estate person must be primarily engaged in the real estate business in order to qualify for membership, constitutes an unreasonable restraint of trade and violates the California antitrust laws. Although the issue here presented is one of first impression and we are without the guidance of California authorities, a perusal of the policy considerations underpinning the federal antitrust law and a study of sister state cases dealing with identical problems convince us that appellant's point is well taken and, accordingly, the judgment below must be reversed.

Initially, we observe that the fundamental objective of the antitrust laws is to preserve free and open competition to the end that resources will be efficiently utilized, proper distribution of products will be maintained, and consumers will benefit from competitive pricing and product improvement. The antitrust laws apply to rendition of services as well as to the sale of manufactured products (Speegle v. Board of Five Underwriters (1946) 29 Cal.2d 34, 43, 172 P.2d 867). The services of real estate brokers and salesmen constitute ‘trade’ and are subject to antitrust laws (United States v. Real Estate Boards (1950) 339 U.S. 485, 70 S.Ct. 711, 94 L.Ed. 1007). Cases decided under the Sherman Act and common law policy against restraints of trade are applicable to problems arising under the Cartwright Act (People v. Santa Clara Valley Bowling etc. Assn. (1965) 238 Cal.App.2d 225, 232, 47 Cal.Rptr. 570).

Turning to the merits of the case, we readily concede that not all restraints of commerce are with in the ambit of the Sherman Act, but only those that are undue and unreasonable (Standard Oil Co. v. United States (1911) 221 U.S. 1, 31 S.Ct. 502, 55 L.Ed. 619; United States v. American Tobacco Co. (1911) 221 U.S. 106, 31 S.Ct. 632, 55 L.Ed. 663; People v. Building Maintenance etc. Assn. (1953) 41 Cal.2d 719, 264 P.2d 31; People v. Santa Clara Valley Bowling etc. Assn., supra). As the court observed in Grillo v. Bd. of Realtors of Plainfield Area (N.J.1966) 219 A.2d 635, 644, not every combination in restraint of trade is illegal; it is the unreasonable combination in restraint of trade that is unlawful.

However, contrary to respondent's suggestion, the issue of reasonableness cannot be determined in a vacuum, in disregard of the economic impact of the restrictions on competitors, nor on the ground that the restraint in controversy reasonably relates to the legitimate purpose of an association. As the United States Supreme Court remarked in Associated Press v. United States (1945) 326 U.S. 1, 14, 65 S.Ct. 1416, 1422, 89 L.Ed. 2013, ‘however innocent such agreements might be, standing alone, they would assume quite a different aspect if utilized as essential features of a program to hamper or destroy competition.’

While by general definition the action of a combination is unreasonable if its operation has or may have a tendency toward preventing competition, raising prices, or creating a monopoly, and cannot be justified under the circumstances (Grillo v. Bd. of Realtors of Plainfield Area, supra), the federal courts have held that certain activities in combination have so pernicious an effect on competition and are so utterly devoid of redeeming value that they are conclusively presumed to be unreasonable and unlawful under the Sherman Act. Group boycotts or concerted refusals to deal have been held to be within this forbidden category (Klor's v. Broadway-Hale Stores (1959) 359 U.S. 207, 79 S.Ct. 705, 3 L.Ed.2d 741; Silver v. New York Stock Exchange (1963) 373 U.S. 341, 83 S.Ct. 1246, 10 L.Ed.2d 389; Associated Press v. United States, supra).

In Klor's, defendant chain of department stores, national retailers and their distributors conspired either not to sell to plaintiff retail store or to sell to it only at discriminatory prices. The court labeled this combination as a concerted refusal to deal with plaintiff and held that it constituted a per se violation of the Sherman Act which could not be saved by allegations that they were reasonable under the circumstances.

In Silver, the New Youk Stock Exchange denied to plaintiff nonmembers of the Exchange the right to have a direct-wire telephone connection with members. The court held that removal of the wires by collective action of the Exchange amounted to a per se violation of the antitrust laws, and said: ‘The concerted action of the Exchange and its members here was, in simple terms, a group boycott depriving petitioners of a valuable service which they needed in order to compete effectively . . ..’ Without such services, the court noted, the nonmember dealer is hampered substantially in his business, loses a significant volume of trade with other members of the network, and in deprived of important business advantages (Silver v. New Youk Stork Exchange, supra, 373 U.S. at pp. 347–348, 83 S.Ct. at p. 1252).

In Associated Press, the by-laws of the corporation prescribed that news furnished by the corporation should be available only to members, thereby preventing all nonmembers the opportunity to buy news from Associated Press. The court held that the by-laws on their face constituted an unreasonable restraint of trade. In rejecting defendant's argument that the members as owners of the news items had the right to sell them to whom they wished, the court stated: ‘While it is true in a very general sense that one can dispose of his property as he pleases, he cannot ‘go beyond the exercise of this right, and by contracts and combinations, express or implied, unduly hinder or obstruct the free and natural flow of commerce . . ..’ United States v. Bausch & Lomb Co., 321 U.S. 707, 722, 64 S.Ct. 805, 813, 88 L.Ed. 1024. The Sherman Act was specifically intended to prohibit independent businesses from becoming ‘associates' in a common plan which is bound to reduce their competitor's opportunity to buy or sell the things in which the groups compete.’ (Associated Press v. United States, supra, 326 U.S. at p. 15, 65 S.Ct. at p. 1422.)

A case analogous to the instant one came up in New Jersey in 1966. Grillo, a real estate broker licensed by the State of New Jersey, had been refused admission to defendant real estate board. The board operated a multiple listing service which was for the exclusive benefit of the members. As a condition to qualifying for membership the by-laws provided inter alia that the broker must be principally engaged in buying and selling real estate for compensation. Relying mainly on Associated Press, Klor's and Silver, the New Jersey court held that, although the multiple listing service may have a beneficial effect on the market and may potentially stimulate competition in the real estate field if it places listings in the hands of all brokers in the area, the commitment to furnish such information only to fellow members amounted to a concerted refusal to deal with nonmembers, or as a group boycott, and therefore constituted an unreasonable restraint of trade. In elaborating on the multiple disadvantages flowing from this type of combination, the court stated: ‘Plaintiff and others who are nonmembers of defendant Board are placed at a competitive disadvantage as a result of the defendants' action in combination. Nonmember brokers, unable to provide the advantages of the multiple listings system, may lose the listing of sellers who are interested in displaying their property to the widest possible audience. The prospective buyer who is interested in a broad selection will most likely go to a Board member who can offer him all the properties listed with other Board members in the area. The nonmember broker will not be able to serve effectively the prospective buyers who do come to him. He is precluded from offering for sale a high percentage of the properties which are for sale in the Board's area. Many of the properties for sale will be unknown to the nonmember broker—although the Board member has easy access to this same information. If the nonmember broker does learn of a property which has been multiple listed, and finds a buyer for it, he will not be able to make the sale. The selling owner, already committed to pay a commission to a Board member, cannot afford to sell through the nonmember broker and pay another commission to him

“His knowledge of available properties is the broker's chief stock in teade.' Myers v. Arcadio, Inc., 73 N.J.Super. 493, 499, 180 A.2d 329 (App.Div.1962). Listings are equivalent to the news items of the Associated Press case, to the appliances of the Klor's case and to the information available by direct wire service in the Stock Exchange case. Without goods to sell the businessman cannot survive. The restrictions which defendants have placed in the way of a nonmember obtaining and using listings may drive that nonmember from the field of real estate selling.' (Grillo v. Bd. of Realtors of Plainfield Area, supra, 219 A.2d pp. 646–647; emphasis added.)

Grillo was followed by Oates v. Eastern Bergen Co. Multiple Listing Service, Inc. (N.J.1971) 273 A.2d 795, where the court concluded that similar exclusionary practice relating to multiple listing service constituted a per se violation of the state antitrust laws. The per se rule was recently reaffirmed in Collins v. Main Line Board of Realtors (1973) 452 Pa. 342, 304 A.2d 493. In that case Margaret Collins, a real estate broker licensed under the laws of Pennsylvania, had sought membership in the Main Line Board of Realtors. The Main Line Board, like MCBOR, operated a multiple listing service. A real estate broker who was a nonmember of the board could not list properties for sale on the multiple list and could not receive the multiple listing service. Having failed to get admission to the board, Collins brought suit charging that the board was engaged in an unreasonable restraint of trade. The court held that the restrictions contained in the by-laws amounted to a per se violation of the antitrust law, and pointed out the harmful effects of the combination as follows: ‘A nonmember, who has a property for sale, is thus deprived of the benefits of the multiple listing which brings the property to the attention of member brokers for solicitation of purchasers of said property. The owner of said property, who lists with a nonmember, is thus deprived of the multiple listing benefits.

‘A nonmember is also deprived of the benefits of having available a list of properties to show to prospective purchasers dealing with a nonmember. Prospective purchasers do not have the benefit of seeing the wide range of properties available and appearing on the multiple list. [Emphasis added.]

‘A nonmember and clients of a nonmember are restricted from advertising their products through the multiple listing service or from receiving significant information about available products on the market at any given time. In effect, a nonmember cannot compete in the buying and selling of real estate for clients as effectively as a member of the appellee corporation.’ (Collins v. Main Line Board of Realtors, supra, at pp. 495–496.)

The applicability of the aforecited authorities to the case at bench can hardly be disputed. MCBOR, a combination of competitors, comprising 75 percent of the real estate brokers selling residential properties in Marin County, denied appellant, a real estate salesman, the membership benefits, and thereby an access to the crucial multiple listing service. Due to the deprivation of the wide-ranged benefits furnished through multiple listing, appellant's ability to compete with MCBOR members was seriously crippled and frustrated. In view of the principles laid down in the cited cases, the exclusionary practices of MCBOR may properly be characterized as a concerted refusal to deal with nonmembers or a group boycott which constitutes a per se violation of the California antitrust laws (Bus. & Prof.Code, §§ 16700–16758), and must be held an unreasonable restraint of trade as a matter of law.

Respondent's contention that the per se rule should not be applied in the case at bench because, unlike Grillo and Collins, there was no absolute prohibition against dealing and cooperation with nonmembers,4 cannot be accepted for two main reasons. First, the cases repeatedly emphasize that in order to establish a violation of antitrust laws it is not necessary to show that the challenged arrangement suppresses all competition between the parties. It is sufficient if the combination has or may have a tendency to prevent competition and deprive the public of the advantages which flow from free competition (Paramount Famous Corp. v. U. S. (1930) 282 U.S. 30, 44, 51 S.Ct. 42, 75 L.Ed. 145; Fashion Guild v. Trade Comm'. (1941) 312 U.S. 457 466, 61 S.Ct. 175, 85 L.Ed. 409; Associated Press v. United States, supra, 326 U.S. at p. 17, 65 S.Ct. 1416, 89 L.Ed. 2013). Second, the record reveals that the permitted cooperation between members and nonmembers resulted merely in a negligible volume of sales: 21 out of 2,003 in 1970; 35 out of 2,672 in 1971; and 51 out of 2,964 in 1972. It is, of course, well recognized that isolated acts of cooperation between members and nonmembers do not alter the fact that the nonmembers are in reality deprived of the use of the multiple listing service in selling and buying real estate (Collins v. Main Line Board of Realtors, supra, 304 A.2d at p. 497). Such acts have been properly described as ‘illusory’ or ‘token’ cooperation which do not, and may not, serve as substitutes for insuring real competition between the parties (cf. Oates v. Eastern Bergen Co. Multiple List. Serv., Inc., supra, 273 A.2d at p. 805).

Respondent's additional arguments that the restriction in question should be held valid because the multiple listing service was not mandatory and that the enactment of the full-time rule led to better service to the public, a higher level of professional competence and a greater attention to ethical standards, may be summarily disposed of. As has been repeatedly pointed out, good business practices will not justify an otherwise unlawful combination (U. S. v. Arnold, Schwinn & Co. (1967) 388 U.S. 365, 375, 87 S.Ct. 1856, 18 L.Ed.2d 1249; Oates v. Eastern Bergen Co. Multiple List. Serv., Inc., supra, 273 A.2d at p. 807). More importantly, however, we have held that, considering all the circumstances of the case, the restriction in question was a per se violation of the California antitrust laws. The par se doctrine means that the particular practice5 and the setting in which it occurs compel a presumption that the combination is an unreasonable restraint of trade and therefore illegal. The presumption thus created is conclusive and cannot be abrogated by a claim that the practice was reasonable in the specific circumstances (Klor's v. Broadway Hale Stores, supra, 359 U.S. at p. 212, 79 S.Ct. 705, 3 L.Ed.2d 741; People v. Santa Clara Valley Bowling etc. Assn., supra, 238 Cal.App.2d at pp. 234–236, 47 Cal.Rptr. 570).6

Respondent's alternative contention that the appeal ought to be dismissed because the primary engagement requirement has been deleted from the MCBOR By-Laws, thereby rendering the appeal moot, requires only brief discussion. Although as a general rule an appeal presenting only academic or abstract questions should be dismissed as moot (Paul v. Milk Depots, Inc. (1964) 62 Cal.2d 129, 132, 41 Cal.Rptr. 468, 396 P.2d 924), the appeal is not moot nor subject to dismissal if the question to be decided is of general public interest (County of Madera v. Gendron (1963) 59 Cal.2d 798, 804, 31 Cal.Rptr. 302, 382 P.2d 342); or if there is a likelihood of recurrence of the controversy between the same parties or others; or if there remain material questions for the court's determination (Diamond v. Bland (1970) 3 Cal.3d 653, 657, 91 Cal.Rptr. 501, 477 P.2d 733; Eye Dog Foundation v. State Board of Guide Dogs for the Blind (1967) 67 Cal.2d 536, 541, 63 Cal.Rptr. 21, 432 P.2d 717).

It is evident that the instant appeal falls within each of these exceptions. As mentioned before, the issue raised in this appeal is one of first impression in this state, the determination of which is of important public interest. Also, there is a high probability of the recurrence of the controversy between other parties similarly situated. In addition, the record leaves no doubt that the dispute in the lower court was decided solely on the propriety of the board's action, and the trial judge himself conceded that due to the denial of membership appellant did incur disadvantages.7 On retrial of the case, therefore, appellant must be accorded an opportunity to prove the scope and monetary amount to damages and loss of business advantages he allegedly sustained on account of respondent's unlawful action.

The judgment is reversed.

FOOTNOTES

1.  The multiple listing materials consist of books containing data and descriptions, including photographs, of properties for sale. These catalogues of available properties are reprinted and updated on a weekly basis and are supplemented by additional loose leaf listings three days a week.

2.  Article I, section 3, provides in part that ‘Associate Members shall be individuals holding a real estate salesman's or broker's license from the State of California and employed by Active Members of this Corporation in the capacity of real estate salesmen under a written contract. Such employer shall require such sales person to be primarily engaged in the real estate business.’Article I, section 9, sets forth in part that ‘No Active Member shall employ anyone . . . whose personal repute for fair and ethical conduct and integrity in his dealings with the general public and with other real estate licensees is not found acceptable by the Roard of Directors.’ (Emphasis added.)

3.  The following is illustrative of how MCBOR advertised its multiple listing service in the news media: ‘Multiple Listing had a Whale of a Year! Over $150,106,463 in multiple listing sales in 1972! Dollar increase over 1971 $128,085,115. Yes, almost $21,021,348 extra cash went into the pockets of Marin home owners in 1972 because they wisely listed their property through Multiple Listing Service. Thus they got 225 Realtor members of the Marin County Board of Realtors and a sales force of over a thousand realty experts working for them. This makes short work of selling desirable property at profitable prices!’

4.  Article IX, section 11, of the By-Laws provides in effect that a member may at his option deal with nonmember brokers with reference to his own multiple listing, and in the event of sale there shall be a division of the commission.

5.  We do not hold that the bare requirement of membership in a real estate board or association as a condition precedent to access to a multiple listing service owned and controlled by the board or association constitutes a per se violation of the antitrust laws.

6.  For the same reason we need not decide that the provisions of the By-Laws should be invalidated and held unreasonable on the additional ground that the state law regulation the real estate business in detail (Bus. & Prof.Code, § 10000 et seq.) has preempted the field (cf. Associated Press v. United States, supra, 326 U.S., at p. 19. 65 S.Ct. 1416, 89 L.Ed. 2013; Grillo v. Bd. of Realtors of Plainfield Area, supra, 219 A.2d at p. 648; Collins v. Main Line Board of Realtors, supra, 304 A.2d at p. 497).

7.  The illustrative portion of the record reads as follows: ‘THE COURT: . . . there is no question on the record before me that Mr. Palsson is prejudiced by not being a member of the board; that he loses advantages that members of the board have. If that weren't the case, the board wouldn't be able to collect its dues. So, the question in this case is whither the action of the board was proper. There is no question that the action of the board imposed a disadvantage upon Mr. Palsson, and you are entitled—you don't really have to show that. You are entitled to show the monetary extent of that disadvantage, if you can, and then the next question is whether that disadvantage is a result of proper or improper action on the part of the board.’ (Emphasis added.)

KANE, Associate Justice.

TAYLOR, P. J., and ROUSE, J., concur.

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MARIN COUNTY BOARD OF REALTORS INC v. PALSSON (1975)

Docket No: Civ. 34477.

Decided: August 21, 1975

Court: Court of Appeal, First District, Division 2, California.

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